Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 1
I was just watching an economics video about Japan and they quoted this staggering fact which I just checked and is correct.
The combined 3900 listed companies market capitalisation is 829.2 trillion yen which in dollar terms equates to the market cap of Apple and Microsoft.
Wow!
No. of Recommendations: 0
I've just had a quick look at the entire UK listing which £3.5trillion so what's that an Apple and Berkshire combined?, also bonkers.
No. of Recommendations: 7
I've just had a quick look at the entire UK listing which £3.5trillion so what's that an Apple and Berkshire combined?, also bonkers.
Heck, the largest 10 US stocks (mainly the "magnificent seven") account for around 19% of the total world equity market cap, up from 8% in 2013.
Jim
No. of Recommendations: 0
Yes.
The discussion also mentioned..
The often quoted
"The 1.15-square-kilometer (0.44 sq mi) palace grounds and gardens are built on the site of the old Edo Castle. During the height of the 1980s Japanese property bubble, the value of the palace grounds was held by some to be more than that of all the real estate in the U.S. state of California."
As to how toppy real estate and equity valuations were back then in Japan.
Made me think that perhaps the US is in the same boat now. Perhaps it is different this time?
I do appreciate there are fundamental differences between the US and Japanese economies however from a valuation perspective.
A guy on YouTube made a good point that Apple PE ratio has expanded from from 20 to 33 despite declining revenue and earnings, bot normal or sustainable and definitely bubble territory.
No. of Recommendations: 10
A guy on YouTube made a good point that Apple PE ratio has expanded from from 20 to 33 despite declining revenue and earnings, [n]ot normal or sustainable and definitely bubble territory.
Expensive, yes, but I don't know about bubble territory. Revenue is slightly down, but earnings have held steady, within 5%. Apple continues to expand its user base, and an increasing proportion of revenues and earnings is coming from services, which are dependent on the number of users, with revenues from iPhones down close to 50% (it used to be more than 2/3).
I wouldn't buy it at this price, but Buffett has showed us over and over that holding on to a moderately expensive stock probably makes more sense than selling it every time it gets a bit pricey and hoping you will be able to get back in at a lower price (and you need a substantially lower price, when you factor in taxes on the realized capital gain you made.
That said, I think the risks are substantial, and represent by far the highest risk of owning Berkshire, with the Apple position representing 25% of Berkshire's market cap. Production in China is the obvious risk, sales in China is another important risk, and technological obsolescence is a non-trivial risk too. I know a lot of people here have big stakes in Berkshire, sometimes 40% and more, and if I were in that position, I would seriously consider hedging a big part of that Apple exposure. For those who can't stomach the idea of selling shares short or maintaining a semi-permanent position in puts (at, say, $100/share), another option might be to own shares in Apple's major phone OS competitor, the one with no exposure to China, the one that sends about $20b to Apple every year, almost a fifth of Apple's operating earnings.
dtb
No. of Recommendations: 6
For those who can't stomach the idea of selling shares short or maintaining a semi-permanent position in puts (at, say, $100/share)...
One could write long dated high strike calls to fund the purchase of the long dated low strike puts. Both of them at strikes pretty far from the current price.
The risk here is that the price of Apple soars but the price of Berkshire doesn't, so your hedging account loses money that you can't pull from your long side.
This is unlikely to be true forever, especially since we're primarily concerned about something very bad happening to Apple, but that's why the emphasis on "long dated".
It's pretty certain that nobody is going to exercise those calls you wrote, even if they go into the money, so long as they still have material time value left that could be realized.
I'm not recommending this, just mentioning it as another approach to consider.
Yet another possibility comes from observing that the risk to a Berkshire holder of an Apple business crash is actually a fall in the price of Berkshire, not that of Apple.
One could therefore consider hedging one's Berkshire position. It's likely a whole lot cheaper.
Insuring Berkshire's share price against a drop of 21% or more for a year (Jan 2025 $290 puts) currently costs about 0.6% of the current Berkshire share price.
Again, I'm not recommending this, just mentioning it.
What would be even better is if someone would let you by a put option against Berkshire's book value...give Goldman a call : )
Jim
No. of Recommendations: 0
The Apple stake less than 25 % though
